Pfizer: Can Pfizer Maintain its 2021 COVID-19 Growth Prospects Over The Long-Term?
Pfizer is one of the most interesting bio-pharma names in the market right now because of the success that it has had with its COVID-19 vaccine. The Pfizer(PFE)/BioNTech (BNTX) vaccine has proven to be highly effective against the COVID-19 virus. Orders from across the world continue to come in for doses. Because of this, the company stands to benefit, financially, in a major way in the short-term. However, the question remains, should investors buy shares of PFE because of the vaccine hype or will this turn out to be a one-time event that does not result in long-lasting cash flows?
In a recently published article, 5-star Nobias analyst, Keith Speights, who writes for The Motley Fool, highlighted the short-term windfall that Pfizer is expected to receive from its COVID-19 program. He says, “In February, Pfizer estimated that the vaccine would generate sales of around $15 billion this year based on supply deals in place at that time.” Speights continued, saying, “However, since then the two companies have received additional orders for BNT162b2 -- 100 million more doses for the U.S. and 200 million additional doses for the European Union. These deals should boost BNT162b2 sales above $20 billion in 2021.”
This is obviously great news for the company. Investors love seeing top-line growth and it appears as if PFE’s COVID-19 vaccine has a lot of potential to inspire just that in 2021. But, the problem with obvious information, is that it is likely already baked into the company’s share price.
Right now, the consensus analyst estimate for PFE’s earnings-per-share growth in 2021 is 45%, in large part due to the short-term boost provided by widespread vaccination. But, as of right now, at least, the consensus analyst opinion for PFE’s 2022 earnings-per-share growth rate is -8%, meaning that the Wall Street community doesn’t believe that PFE can maintain its growth rate.
What investors who’re thinking about buying PFE shares today need to ask themselves is whether or not they expect to see long-term sales coming from the COVID-19 segment? Speights commented on this, saying, “No one knows for sure just how much of that enormous revenue these companies will make in 2021 will be recurring. In theory, COVID-19 vaccines could provide protection against infection for years. In that case, sales of vaccines would plunge in 2022.” “On the other hand,” he continued, “let's assume that booster doses are needed every six months or so. That scenario would mean that Pfizer, Moderna, and the other companies could count on significant revenue every year.
If you watch the evening news, you’re probably well aware that COVID-19 case counts are rising in many areas within the United States and even more so in foreign countries that have only vaccinated a very low percentage of their population. This has caused fear to rise regarding the potential spread of mutated strands of COVID that are more contagious, deadly, and even resistant to the current vaccines available to the public.
The rise of COVID-19 variants has given credence to the idea that we’ll need to receive booster shots and/or regular vaccines, similar to flu shots, moving forward for the foreseeable future. It’s still unclear whether or not this will be the case. We’ve recently seen good news regarding the levels of antibodies in the blood 6 months after the vaccination date; however, we’re going to need more long lasting, or even permanent, results before herd immunity becomes a reality.
Along these lines, Speights said, “Probably by the fourth quarter we'll at least have a pretty good sense of whether or not annual booster doses will be needed. That's when participants in the late-stage studies conducted by Pfizer/BioNTech and Moderna will have been fully vaccinated for at least one year.” But, for the time being, he said “Probably the best guess for right now is to go with Moderna CEO Stephane Bancel's prediction that COVID-19 will be like the seasonal flu. If he's right, annual vaccinations will be needed.”
While the long-term future of the COVID-19 vaccines sales outlook remains uncertain, bullish investors continue to hang onto good news regarding efficacy. Brian Orelli, of The Motley Fool, recently discussed the recently published “real world” study performed by Isreali Ministry of Health, in a podcast with fellow analyst, Speights.
Regarding the study, Orelli said, “But they found that the vaccine effectiveness was at least 97% at preventing symptomatic disease, severe and critical disease, and death. Unvaccinated people were 44 times more likely to develop symptomatic COVID-19, and 29 times more likely to die from COVID-19. Perhaps most interestingly, the vaccine effectiveness was 94% against asymptomatic infections.” And, the good news continues to roll in for the Pfizer vaccine. In a separate report, Orelli highlighted the results from the company’s recent vaccine study involving adolescents, noting the 100% efficacy result. And, not only was the drug perfect when it came to stopping disease, it appears to be more impactful, from an immune response/protection perspective, in younger patients.
Orelli noted that “Antibody levels created by the vaccine in adolescents were around 75% higher than the antibody levels seen in participants ages 16 to 25 who were in earlier clinical trials.” Granted, this result came from a small sample size. Orellia points out, “While impressive, and better than the roughly 95% efficacy that the vaccine produced in adults, the 100% efficacy is based on just 18 COVID-19 cases in the placebo group vs. 0 in the vaccine group. If the study had enrolled more kids or gone on longer, there might have been a case in the group of patients who received the vaccine, ruining BNT162b2's perfect efficacy.”
Nicholas Ward is a Senior Investment Analyst at Wide Moat Research. He has spent the last 8 years writing about the stock market at various publications, including Seeking Alpha, The Street, Forbes Real Estate Investor, Sure Dividend, The Dividend Kings, iREIT, Safe High Yield, and The Intelligent Dividend Investor.
Orelli concludes his piece, highlighting Pfizer’s plans for trials in even younger populations. The company had divided children up into three age-related categories: 5-11 years old, 2-5 years old, and 6 months to 2 years. He says that the goal here is to get children vaccinated throughout the summer, before the upcoming school year, but he cautions, “The clinical trial in younger children will take longer than the study in adolescents because the companies have to figure out the optimal dose for younger children, who are much smaller than adults.” Yet, the fact remains, Pfizer’s drug appears to be highly effective in younger patients as well, which bodes well for the continued widespread use of its product over the longer-term.
In a third recent article, titled “3 Great Robinhood Stocks To Buy With Your $1400 Stimulus Check” , Speights touched upon his bullish PFE outlook yet again. He acknowledged that PFE has been a bit of a “dud” in recent years, underperforming the S&P 500.
However, the stock’s undervaluation, combined with the fact that PFE recently spun off much of its legacy drug portfolio via Viatris (VTRS), which should boost its growth prospects moving forward, and the COVID-19 sales/earnings tailwind, leads him to believe that this stock represents an attractive value for investors.
He said, “Pfizer's shares trade at less than 11 times expected earnings. The company also offers a juicy dividend that currently yields close to 4.4%. If you're looking for a combination of growth, value, and income, Pfizer appears to be a great stock to scoop up right now.”
Disclosure: Nicholas Ward has a long position in Pfizer and Viatris. Nicholas Ward wrote this article for Nobias at their request with a view of giving investors a balanced perspective based on the writings of Nobias highly rated analysts and bloggers. Nobias has no business relationship with any company whose stock is mentioned in this article and does not have a position in this stock.
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